Budget 2021 wishlist: Industry bodies seek coal duties reduction

Coal Insights Bureau

Customs duties on coking coal, met coke as well as domestic cess on coal need to be cut to make Indian manufacturing sector competitive and Atmanirbhar, industry bodies have told Finance Minister Nirmala Sitaraman ahead of the Union Budget 2021.

Steel sector

Domestic steel makers under the aegis of Confederation of Indian Industry (CII) have sought reduction in basic customs duty on key raw materials like anthracite coal, metallurgical coke, coking coal, and graphite electrode in the upcoming Union Budget.

The non-availability of these items in good quality and quantity hinders the growth of the steel industry, CII said.

CII argued that domestic availability of anthracite coal, the basic customs import duty on which is 2.5 percent, is falling which might force steel industry to become dependent on imports.

CII has also suggested cutting import duty on metallurgical coke to 2.5 percent from 5 percent now.

“Low ash metallurgical coke, HS Code 2704, is a key raw material in steel accounting for almost 46 percent of the total raw material cost. Reduction in duty will help the domestic steel industry to be costcompetitive,” it said.

The industry body has also suggested removing 2.5 percent import duty on coking coal as domestic supply of coking coal is insufficient and most of it has to be imported.

“The reduction will also help to rationalise the duty structure on met coke, which is the end product of coking coal,” it added.

CII also sought greater availability of graphite electrode, a major consumable for steel sector by abolishing import duty of 7.5 percent.

With 60 percent of domestic production being exported, domestic steel makers are forced to import. “High duty merely increases the cost burden,” CII said.

Aluminium sector

Aluminium is a power intensive industry as power accounts for almost 40 percent of the cost of production.

The cess on coal at Rs 400 per ton alone raises the aluminium cost by $64 per ton, said industry representatives.

Royalty and taxes as a percentage of exmine coal cost in India is among the highest in the world at around 25-31 percent as against 7 percent in Australia and 12 percent in Indonesia.

“Taxes on coal in India raise the price by about 24 percent. This affects the competitiveness of the domestic aluminium industry. The industry therefore expects reduction in coal cess and taxes on coal,” a pre-Budget report by Care Ratings said.